Any bookkeeping, business or tax article contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor can it be used to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.

Reporting of $600 Third-Party Payments Delayed

Reporting of $600 Third-Party Payments Delayed

The deadline for reporting thresholds for third-party settlement organizations, which was supposed to be January 1, 2023, has been pushed back because of concerns about the implementation schedule. As a result, third-party settlement organizations won’t have to send a Form 1099-K to the IRS or the payee for the tax year 2022 for the lower $600 threshold amount. This was made possible by the American Rescue Plan of 2021.

Instead, the calendar year 2022 will be a transition year for lowering the reporting threshold for third-party settlement organizations (TPSOs) like Venmo, PayPal, and CashApp, which would have sent taxpayers Form 1099-Ks. The extra time will help make filing taxes in 2023 less confusing and give taxpayers more time to prepare for and understand the new reporting requirements. This change to the law is important because people are more likely to pay their taxes when they have to fill out forms like Form 1099-K.

Taxpayers should know, though, that the current 1099-K reporting threshold of $20,000 in payments from more than 200 transactions remains in place. Taxpayers should also know that the law is not meant to track personal transactions like splitting the cost of a car ride, meal, birthday or holiday gift, or paying a family member or friend for a household bill.

Background

The American Rescue Plan of 2021 changed the reporting threshold for TPSOs.  The new limit for business transactions is $600 per year. Before, the limit was more than 200 transactions per year which added up to more than $20,000 in total. The law says that starting on January 1, 2023, a TPSO must report all third-party network transactions paid in 2022 with any participating payee that exceed $600 in total payments, regardless of the number of transactions. TPSOs report these transactions by sending IRS Form 1099-K, Payment Card, and Third-Party Network Transactions, to each payee.

Transition Period

The transition period delays the reporting of transactions in excess of $600 to transactions that occur after the calendar year 2022. It is meant to make it easier for TPSOs to comply with taxes and for individual payees to report their income taxes. In a third-party network transaction, a participating payee is anyone who accepts payment for a business transaction from a third-party settlement organization.

Taxpayers who may have already gotten a 1099-K because of the changes to the law should know that the IRS is working quickly to give instructions and make things clear so that taxpayers know what to do. More information about the delay and how it will affect taxpayers and the industry will be available soon. In the meantime, if you have any questions or concerns, don’t be afraid to contact the office.

Reporting of $600 Third-party Payments Delayed

 

SHARE THIS POST NOW:
Share on facebook
Share on twitter
Share on linkedin
Share on email
Share on print

Read more

Take care when choosing a tax return professional The Internal Revenue Service reminded taxpayers that carefully choosing …

Have You Recently Reviewed Your Life Insurance Needs? At one time, life insurance played a much larger …

Erroneous Refund Mistakes happen. What if you receive an erroneous refund from the IRS that you’re not …

CONNECT WITH US TODAY!

Address:
24044 Cinco Village Center Blvd #100

Katy, TX 77494

Phone:
(713)-855-8035

Email:
admin@fas-accountingsolutions.com

Sign up for our Newsletter 

Let’s stay connected! You will receive updates straight to your inbox.

Reporting of $600 Third-party Payments Delayed